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Functions of Money
Functions Of Money. ' Our society runs on money. You need money to survive, and that is an inescapable fact. Whether you need a house, food or clothes, you will always nee money to do that. We use the money so often that we basically forget what money actually is. Not as an object, but as a system or medium of exchange. 'Money As A Store Of Value. Money is an effective and efficient store of value used universally. Sure, there are different currencies, but the underlying idea and system remains the same no matter where in the world you go. From Germany to Autralia to Lithuania, the system of exchange are all the same. You give money in exchange for a good or service. You could think of it as an advanced form of bartering if you wish, exhanging one thing for another. And that is exactly what money is; a medium of exchange, accepted all over the world. Once again, the law of equivalent exchange comes into play, but this time most hings have a set price. With bartering, you may have been able to say, "I'll trade you one apple for two oranges," but you cannot say, "I'll trade you two Nokia flip phones for that iPhone 5s." when in a store. You would have to pay the set price for that phone and plan that may or may not come with it. Money retains its value. I could receive fifty dollars from my part time job today, but I would not have to spend it today. I could keep it for tomorrow, next week, next year, for five years, and it would still have the same value of fifty Australian dollars. The value may differ depending on which currency you are using though. For example, at the moment, $1 in Australian money equals $0.91 American dollars. 'Money As A Means Of Exchange. ' Money is basically the most effective means of exchange that is establishe in the modern world. There are variations of the system, like different currencies, and different government systems that determine what you can do with your money and where it goes towards in term of taxes (communism, democracy etc.) and electronic money systems (credit cards, eftpos, online banking etc.) but the whole concept is basically the same. Money is an economic resource that enables one to obtain value in one way, and use its value in another way. So basically speaking, you can earn money and then spend it. Universally accepted-although you do need to be careful about what currency you are using-it is by far the easiest way to receive a good or service without having to give them a service in return or one of your personal belongings. Instead, you go to a shop or a business and use their services or purchase an item, or multiple items. The only thing you need to worry about is if you have enough money for the service/item, and if you have your wallet or credit card with you. There is an extremely large chance that you have never lived in a society withiout money, so I suspect that you do not know first-hand how society and businesses would function without it. As i was saying before, our society does indeed run on money, and that is an inescapable fact, unless you can find someone in this day and age that would be willing to barter with you. I would hazard a guess at you would not be able to find anybody who would be willing to barter with you, so money is obviously an extremely valuble means of exchange in socuiety and our modern world. 'Money As A ''Measure ''Of Value. ' A few paragraphs back, I talked about money being a store ''of value, but now I am going to talk about it being a ''measure of value. It is incredibly easy to use money as a measure of value, you can tell that if you have been living your whole life using the system and the notes, coins and cards that come with it. To make it even more simple, notes have their values clearly printed on them, whilst coins have the value stamped on them. If you have lived your whole life in one country, you will only ever have used one currency, unless you have travelled overseas. So you wouldn't even have the look at the numbers on the coins or notes to see what value the note or coin holds. In my country and currency, a green note is one hundred dollars, whilst fifty dollars is a yellow note and ten dollars is a blue note, and so on. There are coins too, and they are called either one dollar coins, two dollar coins, five cents, ten cents, twenty cents and fifty cents. That wouldn't be the case in another country, as the money we use in Australia would not be legal tender in the United States, for example, therefore we wouldn't be able to use it if we travelled anywhere overseas. The value will remain in a coin or note until a new system is introduce, which will most likely be a very long time. Money retains its value, and each coi and note has a set, permanent value. This is another disadvantage to the bartering system. If you have a cow, it is extremely hard to determine the exact numerical value of the cow. With money, you can just look at the number printed on the note or coin, and it is simple to see the value that the specific note or coin holds. This value will not change unless the system changes. You can know that with the modern monetary system, the value won't change overnight, as it could with bartering if the good was to expire or rot, or go out of fashion or trend. Money and the value that the banknote or coin holds surely won't go out of fashion quickly, even though people might spend it like it is.